Ross v Caldwell

5Each party was self-represented in the Local Court (and in the proceedings in this Court). However, it may be noted in that context that, according to Union Fidelity's website, Mr Ross holds an LLB from the University of New England and an LLM from the University of New South Wales. 6The hearing in the Local Court did not proceed in an orderly way. It is practically impossible to identify with precision what material was before the learned Magistrate. That is not said by way of any criticism of his Honour. A review of the transcript dated 9 October 2012 reveals a considerable degree of confusion as to what documents were relied upon by Mr Ross to prove his claim. Mr Ross asserted that his evidence was attached to his amended statement of claim. However, neither the Court nor Miss Caldwell had the attachments (see transcript of 9.10.12 at T5.10-20; T15.5; T16.4; T19.14-30; T20.15-26; T24.37 - T25.1). Miss Caldwell complained that Mr Ross had not served the evidence relied upon by him in advance of the hearing, despite an order requiring him to do so by 9 July 2012. Notwithstanding the appearance that there was substance in that complaint, Mr Ross was allowed to hand up individual documents identified in (but not annexed to) the pleading as the need arose. The unfairness to Miss Caldwell is manifest. 7Similar confusion arose at the hearing before me. For example, Mr Ross tendered a letter of demand dated 31 October 2011 which he relies upon to establish that the brokerage fee is now due and payable (ex A). When Mr Ross tendered that document, I asked whether it was in evidence before the Magistrate. Mr Ross asserted that it was (T8.9). However, when pressed to show where, he relied upon the fact that he believed it was "contained within the amending statement of claim" (T10.16). In fact, the letter of demand was not referred to in that pleading at all (or attached to it). It appears to have been handed up at some point but not made an exhibit (see discussion below). Accordingly it is not clear whether it was appropriate for me to admit it into evidence in this Court, but for the fact that it is also relied upon by Miss Caldwell (in circumstances explained below). 8It is at least clear enough that the evidence before the Magistrate included the primary contractual document relied upon by Mr Ross (the "prospective approval indication letter"). The claim against Miss Caldwell arose out of a loan application made by her for the purchase of a property at Paradise Point in the State of Queensland. Miss Caldwell made the application to Union Fidelity through a broker, Mr Geoff Stoyles trading as Australian Expat Loans. Mr Stoyles lodged the application with Union Fidelity as mortgage broker. Union Fidelity placed the application with Provident Capital as lender. 9Upon receiving conditional approval for the loan from Provident Capital, Union Fidelity issued the prospective approval indication letter to Miss Caldwell, dated 1 July 2012. Miss Caldwell accepts that she signed that letter (on 6 July 2011) and so is taken to have accepted its terms. 10The letter identified fees payable by the borrower as follows (at page 5): Brokerage fees Payable in accordance with the Direction to Pay addressed to the Settling Solicitor Union Fidelity fees (including Australian Expat Loans for 50%) $13860 Settlement fees $880 (In accordance with irrevocable authority) 11The terms of the irrevocable authority attached at page 9 of the letter were as follows: The borrower irrevocably directs and authorises the settling solicitor to pay Union Fidelity Capital Funding Pty Ltd from settlement proceeds as follows: Brokerage fee $13,860 Settlement fee $880 Disbursements $0 Total payment $14,740 12For emphasis, the last page of the agreement set out "the detail on how and what fees are payable". That page clearly represented that the brokerage fee of $13,860 "for which you Australian Expat Loans get half" was payable from the settlement proceeds upon settlement of the loan. 13On the strength of those provisions alone, one would have little difficulty reaching the conclusion that the brokerage fee was payable upon settlement of the loan. However, nestling within the verbiage of an unrelated clause earlier in the letter (under the heading "conflict" and otherwise dealing with the position of the lender, Provident) were the following further provisions (at page 4 of the letter): (c) It is acknowledged and agreed by the Borrower that the Brokerage Fee and Settlement Fee and disbursements are payable regardless of whether the loan proceeds or not. In the event of default of payment of brokerage fee/settlement fee and/or disbursement by the Borrower to Union Fidelity, the Borrower hereby charges [the land proposed to be purchased] of which the Borrower is the registered proprietor/registered owner and all the estate and interest of the Borrower of that land and all other land of which the Borrower is currently and in the future the registered proprietor/registered owner with the payment to Union Fidelity of all monies which are due and payable to Union Fidelity. The jurisdiction for any conflict shall be in a competent court of New South Wales. The Borrower authorises the lodgement of a caveat in the event of default. (d) For the purposes of this prospective Approval Indication an event of default means a failure by the borrower to remedy or make good any event by which the bower does not proceed with the accepted loan as set out in this Prospective Approval Indication after 7 days notice of default in writing has expired. 14Mr Ross accordingly contends that, having bound herself to the terms of the letter by signing it, Miss Caldwell became liable to pay the brokerage fee whether or not the loan proceeded. 15Miss Caldwell did not complete the purchase of the property at Paradise Point. She contends that she was prevented from doing so by reason of Union Fidelity's failure to process the loan application in a timely manner, causing her to be in breach of the contract for the purchase of the land. Her unsuccessful cross-claim in the Local Court was to recover the deposit of $45,000 forfeited by her allegedly as a result of those events. 16The confusion generated at the hearing in the Local Court by the disorderly fashion in which Mr Ross presented his evidence greatly impeded Miss Caldwell's ability to present her defence. It was nonetheless tolerably clear that she disputed both the existence of the debt and the validity of the purported assignment to Mr Ross. 17One of the arguments raised by Miss Caldwell (on page 2 of her written submissions in the Local Court) was that, since Mr Stoyles was entitled to 50% of the brokerage fee (but only upon settlement, which never occurred), Mr Ross's claim included a claim for a debt that could not be his. The learned Magistrate appears to have acceded to that argument. Most of his Honour's judgment dealt with Miss Caldwell's unsuccessful cross-claim. Mr Ross's claim was dealt with briefly at the conclusion of the judgment, as follows: With regard to the plaintiff's claim I am not satisfied that the debt purchased from Union Fidelity Capital Funding in the sum claimed can be substantiated. The agreement between the parties provides that a brokerage fees [sic] amount to the sum of $13,860.00, "for which you Australian Expat Loans get half." The debt purchased is not valid and is therefore void ab initio. Section 12 of the Conveyancing Act 1919 requires that the assignment be an absolute assignment of the debt. An absolute assignment is one by which the entire interest of the assignor in the chose in action is transferred to the assignee. Union Fidelity Capital Funding had no such debt in the sum claimed to assign. 18The grounds on which Mr Ross seeks leave to appeal against that part of the decision are: 1. The Magistrate erred in fact that the contract dated 1st July 2011 between Union Fidelity Capital Funding Pty Ltd and Jane Margaret Caldwell is subject to privity of contract and the accompanying contract debt owed ab initio to Union Fidelity Capital Funding Pty Ltd (as the Introducing Mortgage Facilitator and Assignor) from Jane Margaret Caldwell (as Borrower) was for $14,740 and capable of absolute assignment. 2. The Magistrate erred in Law and in Equity that the assignment was not a good legal and equitable assignment of the entire interest of the assignor of a legal chose in action. 19On the basis of Mr Ross's submissions as developed in argument, I understood both grounds to relate to the question whether Mr Stoyles was a party to the brokerage agreement. The Magistrate's decision appears to have rested on the conclusion that he was. 20It is appropriate to consider the correctness of the premise assumed by Mr Ross that his grounds of appeal involve questions of mixed law and fact (so as to require leave). Mr Ross addressed that issue during the hearing before me (T14.19-15.21). In explaining his assumption that his grounds of appeal do involve questions of mixed law and fact, Mr Ross referred to circumstances outside the written terms of the prospective approval indication letter as informing the question of privity. 21The question whether a person is a party to a contract could, depending on the circumstances, be a question of law or a question of mixed law and fact. Mr Ross's concession that questions of fact arise in the present case presumably derives from his close familiarity with the totality of the dealings between Union Fidelity, Mr Stoyles and Miss Caldwell. It is relevant in that context to note that the prospective approval indication letter was sent to Miss Caldwell care of Mr Stoyles and that he attended to its execution by her (see his affidavit affirmed 25 May 2012 in the Local Court, which is annexure 3 to Mr Ross's affidavit sworn 29 April 2013 in these proceedings). The question whether he was a party to the agreement in his own right would in all likelihood be informed by circumstances outside the four corners of the letter itself. In all the circumstances, I am satisfied that the appeal is brought on grounds that involve questions of mixed law and fact and, accordingly, that the leave of this Court is required to bring the appeal, as contended by Mr Ross. 22I have concluded that leave should be refused. My reasons for reaching that conclusion are, in summary: (a)even if the decision entailed error as alleged, the evidence adduced by Mr Ross in the Local Court could not have been accepted as proof of his claim; (b)having regard to the manner in which Mr Ross conducted the proceedings in the Local Court, the interests of justice would not be served by giving him a second opportunity to prove his claim; (c)this Court should not lend its aid to business practices which have the appearance of circumventing statutory protections intended for borrowers in the position of Miss Caldwell. 23Each of those conclusions is explained below. 24The Magistrate determined the claim on a single issue, namely, whether the purported assignment of the debt failed by reason of any entitlement of Mr Stoyles to part of the brokerage under the brokerage agreement. Even if, properly construing the agreement in the context in which it was entered into, the whole of the brokerage fee was a debt to Union Fidelity, it is doubtful whether the evidence before the learned Magistrate was capable of establishing Mr Ross's entitlement to the relief sought. 25The Magistrate evidently reasoned that, accepting that Mr Stoyles was a party to the brokerage agreement, the purported assignment of the debt failed, presumably because there was no assignment by Mr Stoyles of his share of the debt or because Union Fidelity purported to assign a chose in action to which it had no title. 26Leaving aside the effectiveness of the assignment having regard to that issue, Mr Ross had other matters to prove in order to succeed in his claim. In particular, he had to prove: (a)that the debt had become payable by Miss Caldwell; (b)that notice of the assignment had been given in accordance with s 12 of the Conveyancing Act 1919. 27As to whether the debt had become payable, Miss Caldwell attempted to put an argument to the Magistrate that Union Fidelity had agreed to "transfer the funding" (their words - presumably a reference to the terms of the existing brokerage agreement) to a second loan application by her for the purchase of a different property (T38-39). An email from Mr Alex Ross (Mr Ross's son) provided support for Miss Caldwell's argument on that issue (annexure O to Miss Caldwell's affidavit in this Court sworn 31 May 2013). A careful study of the transcript reveals, however, that the argument got lost in the confusion surrounding Mr Ross's missing evidence (T39-40). 28Miss Caldwell's submissions and evidence in the proceedings before me revealed that, had she been given a fair opportunity to develop the argument, she would have sought to prove (and argue) that Union Fidelity had undertaken to attempt to place the second loan and had offered to "transfer" the brokerage agreement to that application. When she and her partner later complained of a lack of progress in processing the second loan application, they were informed by email dated 1 November 2011 from Mr Ross that the matter had been "transferred to Sydney Office - Legal Services - to deal with". It is doubtful whether Union Fidelity in fact has a Sydney office. Mr Ross lives in and operates out of Moss Vale. 29Mr Ross undertook in the email to respond to Miss Caldwell's requests "in due course". According to Miss Caldwell, the only response she received was the statement of claim. Miss Caldwell wished to argue in the Local Court that, in the absence of any further communication or even an explanation from Union Fidelity as to their abandonment of her second loan application, the brokerage fee (otherwise payable out of the settlement of the second loan) was not payable by her at the time the proceedings were commenced. 30As already noted, Miss Caldwell had not been served with any evidence in advance of the hearing in the Local Court. Even though the Magistrate also had no evidence from Mr Ross on the Court file, his Honour appears to have proceeded on the basis that Miss Caldwell ought to have had proof of the matters she wished to argue by way of reply (to material she said she had never seen)(see T17.38-19.30). 31On any analysis, Mr Ross had to prove that the debt he purchased became payable at some stage. He appears to accept that the brokerage agreement required Union Fidelity to serve a default notice in the event that it sought payment of the brokerage fee other than at settlement of a loan (T11.10 in this Court; and see clause (d) of the brokerage agreement set out above). 32Miss Caldwell sought to put an argument in the Local Court that she had not been given any such notice of default (at T40 in the Local Court). For reasons that are not clear, the Magistrate did not engage with those submissions, simply accusing Miss Caldwell of "going all over the place". In fairness to his Honour, that remark was made in the context of the considerable confusion in which he had been already been immersed by reason of the disorderly manner in which Mr Ross had presented his claim. 33In responding to Miss Caldwell's submission that no notice of default had been served on her, Mr Ross produced a letter dated 31 October 2011 (at T47). He acknowledged that the letter was not included in his evidence (which had not been served on Miss Caldwell in any event). However, he asserted that it had been "sent to her". No proof was offered of that assertion. The Magistrate asked Miss Caldwell whether she had received it, to which she said she had not. The Magistrate then said "well, it may have been - missed it in the post then". His Honour later pressed Miss Caldwell on the same point, saying "well he's sent it to your address, hasn't he?" (at T 47.48). There was, however, no proof in Mr Ross's case that the notice of default had ever been sent to Miss Caldwell. It was an unproved assertion made from the bar table. 34As to the assignment, apart from the issue of Mr Stoyles's position, Mr Ross had to prove that express notice in writing had been given to the debtor: s 12 of the Conveyancing Act. The Magistrate did not engage with the arguments sought to be put by Miss Caldwell on that issue. His Honour said (at T6.6): That's not a real issue in this case, whether Mr Ross has bought the debt. It can't really be an issue, it's what Mr Ross does, all he will have to do is produce a document to prove that he bought the debt off the other side. 35The Magistrate repeated similar remarks at other points during the hearing (see T12.28, T36.27). His Honour did not appear to appreciate the need for Mr Ross to prove not only that the debt had been bought but that express notice in writing had been given of that fact to Miss Caldwell. There was simply no such evidence. 36The Magistrate did not deal with any of those matters in his judgment. It may be inferred from remarks his Honour made during the hearing that he felt significantly disadvantaged in the task of determining all issues brought forward owing to the manner in which the claims had been presented. Miss Caldwell drew some criticism from his Honour in that respect. However, it is clear that a primary impediment to the orderly conduct of the hearing was the fact that Mr Ross had failed to file and serve the evidence upon which he relied in advance of the hearing. 37Miss Caldwell presented a series of arguments in this Court as to what she would have said in the Local Court had she been given due notice of the evidence to be relied upon by Mr Ross as to the alleged service of the notice of assignment and the notice of default. She drew my attention to a number of anomalies in those documents, presenting a compelling argument as to why it might be doubted that they were prepared and served by Mr Ross on the dates alleged. There was force in those submissions. A glaring example is the fact that, according to Mr Ross's case, Union Fidelity sent separate notices on the same day to different addresses and in different names for Miss Caldwell (see Ex A and annexure 2 to Mr Ross's affidavit). Ultimately, however, it is not necessary to engage with those issues. The onus of proof was on Mr Ross to establish in the Local Court that the two notices had been served on Miss Caldwell. There was no such proof. 38In addition to making assertions of fact for which there was no evidence, Mr Ross supported his claim with legal submissions of doubtful correctness. That is not an uncommon feature of litigation and is not in itself a point of criticism in the present context. Its significance lies in what it reveals of Union Fidelity's business practices. 39The prospective approval indication letter included a declaration (which Miss Caldwell signed) in the following terms: I/we declare that the credit to be provided to me/us by accepting this prospective approval application from Union Fidelity Capital Funding Pty Ltd is to be applied wholly or predominantly for business or investment purposes (or for both purposes). 40It appears from other material in the loan application that the loan was sought for the purpose of acquiring the property as an investment. There is no suggestion that it was for the purpose of any business conducted by Miss Caldwell. 41The letter warned that, by signing the declaration, the applicant may lose protection under the Consumer Credit Code. It is doubtful whether that was the case for Miss Caldwell. The present loan would in fact have been governed by the National Credit Code, which replaced the Consumer Credit Code from 1 April 2010. The application of the National Credit Code does extend to the provision of credit to purchase residential property for investment purposes (which appears to have been Miss Caldwell's purpose): see clause 5 of the code in schedule 1 to the National Consumer Credit Protection Act 2009 (Cth). 42Mr Ross evidently considers that the declaration (sought by Union Fidelity in a document propounded by it) removes not only the protections of consumer credit legislation but any statutory protection otherwise available to clients of Union Fidelity. In the proceedings in the Local Court, he submitted that the declaration was fatal to a claim by Miss Caldwell for relief under the Contracts Review Act 1980 (T11.13). He relied upon s 6 of the Act, which relevantly provides in subs (2): (2) A person may not be granted relief under this Act in relation to a contract so far as the contract was entered into in the course of or for the purpose of a trade, business or profession carried on by the person or proposed to be carried on by the person, other than a farming undertaking (including, but not limited to, an agricultural, pastoral, horticultural, orcharding or viticultural undertaking) carried on by the person or proposed to be carried on by the person wholly or principally in New South Wales. 43It is not clear to me that a loan for the purchase of property by a retired person as an investment falls within that description. 44In the proceedings before me, Mr Ross submitted (at T34.49) that the same declaration took the loan outside the protections of the Corporations Act 2001. Miss Caldwell submitted that Union Fidelity was bound to deal with her dispute in accordance with the requirements of ss 912A(1)(g) and 912A(2)(a) of the Act. Those provisions require financial services licensees whose financial services are provided to persons as "retail clients" to have a dispute resolution system that complies with the Act. Mr Ross acknowledged (at T35.2) that Union Fidelity is "a full member...strictly bound by the rules of ASIC" (presumably meaning that it is a financial services licensee). However, he said: Mrs Caldwell has signed this as a business loan. Therefore, the conditions as far that apply to home loans is just not applicable. It is not relevant in this hearing. 45I doubt whether that is right. The definition of retail clients in s 761G of the Act appears to exclude businesses and professional investors but it is by no means clear to me that it would exclude a retired person who purchases a property as an investment. 46In any event, it is not necessary to decide those questions. It is enough for present purposes to say that Miss Caldwell's submissions have persuaded me that she has not been dealt with fairly by Union Fidelity or its director, Mr Ross. 47In the first instance, the evidence tends to establish that at least one settlement date under her first purchase agreement passed due to Union Fidelity's admitted failure to process the loan with due expedition (see annexure 10 to Mr Ross's affidavit identifying settlement date of 13 July 2011 and annexure Mi to Miss Caldwell's affidavit being Alex Ross's acceptance of responsibility for the delay at that stage). It may be accepted that negotiations with the vendor continued after that date and that the Magistrate ultimately rejected Miss Caldwell's claim that Union Fidelity's delay was the ultimate cause of the forfeiture of her deposit. But the correspondence reveals that it put her at a considerable disadvantage in her negotiations with the vendor. 48Secondly, the evidence tends to establish that Alex Ross suggested transferring the first brokerage agreement to the second loan application; that Miss Caldwell accepted that proposal (and kept her application with Union Fidelity on that premise); that she in due course complained of further poor performance by Union Fidelity and that its response was to abandon the second loan application with no explanation and to move to enforce the alleged debt for the brokerage fee. 49Thirdly, there is in my view cogent support for Miss Caldwell's complaint that Union Fidelity's business practices seek to circumvent any consumer protections to which its clients may be entitled. I have already referred to the wording of the prospective approval indication letter and, in particular, the obscure placement of the provision (which is inconsistent with or at least different from all other fee provisions) relied upon by Mr Ross as creating liability for the brokerage fee regardless of whether the loan proceeds. The wording of the agreement creates the impression that such liability would only arise through the fault of the borrower, for failure to "make good any event by which the borrower does not proceed with the accepted loan". But that was not Miss Caldwell's position. So far as the evidence reveals, she provided everything that Union Fidelity required of her but they failed to process the first loan application in good time and abandoned the second loan application altogether without explanation. 50Mr Ross, who is a director of the company and its designated person responsible for all complaints and disputes (see annexure J to Miss Caldwell's affidavit) then chose to deal with Miss Caldwell's complaint by taking an assignment of the debt and commencing proceedings against her in another State. 51The proceedings were commenced in Moss Vale in the State of New South Wales, where Mr Ross lives. It must be acknowledged that the small print of the prospective approval indication letter so provides. However, that is another factor that has visited considerable hardship on Miss Caldwell, who lives in the State of Queensland, where she made her loan application and where the property she proposed to purchase is located. She has now had to travel to this State at least twice for hearings in this matter. 52In my view, those circumstances point strongly to the conclusion that the Court's discretion to grant leave to appeal should not be exercised in favour of Mr Ross. It is convenient for present purposes to assume that this Court has power under s 41 of the Local Court Act to enter judgment in favour of a successful appellant in circumstances where, on the facts as found by the Magistrate, that is the only result reasonably open. That is the conclusion to which I came in respect of the Local Courts Act 1982 in Klesteel Pty Ltd v Mantzouranis (Supreme Court of New South Wales, McCallum J, 7 March 2008, unreported). 53That is not this case. Even if the grounds of appeal were made out, it would not be appropriate for this Court to enter judgment for Mr Ross, since questions of fact remain. I see no reason for affording a second opportunity to Mr Ross to prove his claim after he failed to do so at the hearing below. 54Further, in my view a grant of leave in the present case would give the appearance of the Court's condoning unfair practices on the part of a broker towards its client. As concluded by Heydon J (albeit in dissent) in respect of the exercise of a similar discretion, it is time to bring this litigation to a halt: see Harbour Radio Pty Ltd v Trad [2012] HCA 44 at [97]. 55For those reasons, the plaintiff's application for leave to appeal from the part of the decision of the Local Court given 20 November 2012 dismissing his claim is refused.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 September 2013